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Stock Market Outlook for August 31, 2018

Real estate acting as a drag on Canada GDP.

 

Real Time Economic Calendar provided by Investing.com.

 

*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.   As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.

Stocks Entering Period of Seasonal Strength Today:

Comcast Corporation  (NASDAQ:CMCSA) Seasonal Chart

Comcast Corporation (NASDAQ:CMCSA) Seasonal Chart

Expeditors International of Washington  (NASDAQ:EXPD) Seasonal Chart

Expeditors International of Washington (NASDAQ:EXPD) Seasonal Chart

Wal-Mart Stores, Inc.  (NYSE:WMT) Seasonal Chart

Wal-Mart Stores, Inc. (NYSE:WMT) Seasonal Chart

Illumina, Inc. (NASDAQ:ILMN) Seasonal Chart

Illumina, Inc. (NASDAQ:ILMN) Seasonal Chart

Southwest Airlines Co.  (NYSE:LUV) Seasonal Chart

Southwest Airlines Co. (NYSE:LUV) Seasonal Chart

Altaba Inc. (NASD:AABA) Seasonal Chart

Altaba Inc. (NASD:AABA) Seasonal Chart

Starbucks Corporation  (NASDAQ:SBUX) Seasonal Chart

Starbucks Corporation (NASDAQ:SBUX) Seasonal Chart

Mylan Inc.  (NASDAQ:MYL) Seasonal Chart

Mylan Inc. (NASDAQ:MYL) Seasonal Chart

International Game Technology  (NYSE:IGT) Seasonal Chart

International Game Technology (NYSE:IGT) Seasonal Chart

JetBlue Airways Corp. (NASD:JBLU) Seasonal Chart

JetBlue Airways Corp. (NASD:JBLU) Seasonal Chart

 

Upcoming BNN Appearance:

I will be on BNN’s Market Call Tonight at 6:00pm ET this Friday, August 31st taking your calls on Technical Analysis and Seasonal Investing.  CALL TOLL-FREE 1-855-326-6266,  EMAIL marketcall@bnnbloomberg.ca,  or TWEET @MarketCall.

 

Just Released…

The monthly outlook for September has just been released to Equity Clock subscribers.  Highlights include:

  • Equity market tendencies in September
  • Potential breadcrumbs that could lead to the next recession
  • Comments on the seasonal trade in natural gas
  • Comments on the conclusion to the period of strength in the energy sector
  • Notable stocks entering their period of strength in September
  • And more…

To obtain a copy of this report, as well as future reports, you can subscribe to the Chart Database at https://charts.equityclock.com/subscribe.

 

The Markets

Stocks dipped on Thursday as investors reacted to a headline that the Trump administration was preparing for the implementation of $200 billion in tariffs on Chinese goods.  The S&P 500 Index shed just over four-tenths of one percent, weighed down by materials and financials.  The large-cap benchmark is hovering well above levels of support around major moving averages or even trendline support around 2800.  Downside risks are apparent and gong into the weakest month of the year for stocks it is a risky proposition to hold a full allocation to stocks through this last month of the third quarter.  We’ll have the breakdown of the average September performance in our next report.

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One event that has the potential to act as a pivot point for the broader market in the month ahead is the Apple event, which was announced on Thursday to be on September 12.  The event has provided the classic seasonal pattern of buy the rumour and sell the news, leading to investors booking profits following the event itself.  The stock has been moving higher in a parabolic manner since the end of July, supported by news of Warren Buffet’s accumulation of the equity.  Apple is the largest weight in many benchmarks and the parabolic rise combined with the potential for a sell on news event suggests that there could be struggles for equity benchmarks into the back half of the month.

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Apple Inc.  (NASDAQ:AAPL) Seasonality

On the economic front, Statscan released Gross Domestic Product (GDP) figures for the month of June.  The headline print indicated that GDP was unchanged in the month, below the consensus analyst estimate that called for a rise of 0.1%.  The year-over-year change stands at 2.4%.  Stripping out the seasonal adjustments, GDP was actually higher by 2.4% in the month, slightly higher than the 2.3% increase that is average for the last month of the second quarter.  Year-to-date, the pace is running 0.4% below the seasonal average trend, weighed down by weakness in industrial production and real estate.  Real estate is showing the weakest increase through the first half of the year since 2002 when an economic recession took a toll on the housing market.  The results are offset by strength in communication technology, energy, construction, retail trade, and transportation, which are trending firmly above seasonal norms.  Indications suggest that Canada’s economy is still benefitting from the strength in conditions south of the border, but there is a drift in activity away from Canada as a result of tariffs and a more favourable tax environment in the US.  Manufacturing, therefore, is being negatively impacted.  The failure to reach an agreement on NAFTA could have detrimental impacts, pulling the rug out of those areas that are supporting the economy, such as retail and transportation.  Seasonally, GDP dips into the month of July as factory shutdowns take a toll, but then rebound to the highs of the year into September as goods producing industries ramp up activity ahead of the fourth quarter buying season.

Canada GDP - All industries Seasonal Chart

Monthly Canada GDP - All industries Data

Canada GDP - Industrial production Seasonal ChartCanada GDP - Information and communication technology sector Seasonal ChartCanada GDP - Energy sector Seasonal ChartCanada GDP - Utilities Seasonal ChartCanada GDP - Construction Seasonal ChartCanada GDP - Retail trade Seasonal ChartCanada GDP - Transportation and warehousing Seasonal ChartCanada GDP - Finance and insurance Seasonal ChartCanada GDP - Real estate Seasonal Chart

The Canadian dollar moved firmly lower following the result, closing the gap that was charted a few sessions ago.  A short-term trend of higher-highs and higher lows has become apparent, consistent with seasonal tendencies for this time of year that see the Canadian Dollar strengthen into the middle of September.

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Canadian Dollar Forex (CAD) Seasonality

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.82.

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Seasonal charts of companies reporting earnings today:

Big Lots, Inc. (BIG)  Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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